Are LLCs that have elected S Status required to have an

Technical topics regarding tax preparation.
#1
IDCPA  
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annual shareholder's meeting with minutes?

I have a lot of LLC/S clients and I've always assumed no and never worried about it, but now I have a new client specifically asking.

I assume the meeting/minutes are a legal requirement, and thus as an LLC they are not necessary, right?
 

#2
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Whether minutes (or any other corporate formalities) are required depend on state law. The answer can differ based on state, entity type, number of owners, the articles, the bylaws/operating agreement, or other agreements.
 

#3
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I'd be surprised to learn that any state requires annual meetings for LLC members. THE practical advantage of LLCs is that there is no such requirement.
Steve
 

#4
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One of the advantages of an LLC is that corporate meetings and minutes aren't required. At least, I've never heard of a state that requires them. A certain tax status with the IRS doesn't influence this dynamic.
 

#5
gusser  
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Curious, what happens if annual meeting never takes place? Does it affect tax filings of a corporation? Very few small corps document an annual meeting.
 

#6
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It's only a problem when there's a problem.
 

#7
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As a practical matter It's hard to imagine a situation where the failure to have annual minutes would make a difference.
Steve
 

#8
Pitch78  
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gusser wrote:Curious, what happens if annual meeting never takes place? Does it affect tax filings of a corporation? Very few small corps document an annual meeting.


It is a factor in whether a third party can pierce the corporate veil and hold the shareholders personally liable. If you are a corporate entity under state statutes you should follow the formalities required of those statutes.
 

#9
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thanks guys. Very helpful discussion.
 

#10
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The only issues I can foresee are those that affect the s/h corp relationship, like documenting reasonable salaries and notes/interest. But since 95% of my actual corps don't bother....what's the diff?? lol, kinda. Hmm, even I don't hold such annual meeting........
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#11
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ManVsTax has it right in #4. An LLC that makes an S election is treated as an S corporation ONLY for tax purposes. For all other legal purposes, it is still an LLC under state law. I’m not aware of any tax statute that requires an LLC to have annual meetings or to keep minutes of those meetings.

The only requirement that seems relevant is for the LLC to rewrite its operating agreement to eliminate the ability to make special allocations. Making distributions under that provision could create a second class of stock that could terminate the S election.
 

#12
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gatortaxguy wrote:I'd be surprised to learn that any state requires annual meetings for LLC members. THE practical advantage of LLCs is that there is no such requirement.


For LLCs, I have seen the requirement to hold an annual meeting written into many operating agreement templates (another reason not to just download a template and sign it).

Though, of course, as you noted and I agree with, the practical consequences may be nil. I think piercing the corporate veil is talked about way too much for how infrequent it actually is, but the more likely source of an issue is with any non-managing members if the managers/ managing members didn't fulfill their obligations.
 

#13
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I view minutes as little more than evidence, like an affidavit. However, they can be important when dealing with a compliance check for some purpose unrelated to internal corporate affairs.

I've often seen minutes ratifying everything the officers did. The effect of such minutes is a different matter.
Steve
 


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